An entity should put in place its own system of controls in order to achieve its objectives (Mwindi, 2008). A system of effective internal controls is a critical component of company management and a foundation for the safe and sound operation of organizations. However, ineffective internal controls lead to ineffective programs and eventually resulting in losses (Olumbe, 2012). Recent incidence of company failures and accounting frauds square measure principally preceded by failure in companies control structures (Anyanzwa, 2013). Internal controls square measure meant primarily to boost the dependability of economic performance, either directly or indirectly by increasing answerableness among data suppliers in a company (Jensen, 2003). Internal controls give associate degree freelance appraisal of the standard of social control performance in polishing off assigned responsibilities for performance (Beeler et al, 1999). Fadzil et. al, (2005) aforesaid that a good internal control system unambiguously correlates with structure success in meeting its performance target level. Internal Control keeps a company heading in the right direction toward its objectives and also the action of its mission. They promote effectiveness and potency of operations, reduces the danger of plus loss, and helps to confirm compliance with laws and rules. Control additionally ensures the dependability of economic coverage (all transactions square measure recorded which all recorded transactions square measure real, properly valued, recorded on a timely basis, properly classified, and properly summarized and posted). An Organization with effective system of internal control is expected to achieve its objective efficiently and effectively. However the overall purpose of the concept is to help an organization achieve its mission, promote orderly, economical, efficient and effective operations and produce quality products and services consistent with the organization’s mission, safeguard resources against loss due to waste, abuse, mismanagement, errors and fraud. It also promotes adherence to laws, regulations, contracts and management directives as well as develop and maintain reliability financial and management data, and accurately present that data in timely reports (Magara, 2013).
Recent corporate accounting scandals and the resultant outcry for transparency and honesty in reporting have given rise to two disparate yet logical outcomes. First, Internal Auditing skills have become crucial in untangling the complicated accounting manoeuvres that have obfuscated financial statements. Second, public demand for change and subsequent regulatory action has transformed corporate governance. Increasingly, company officers and directors are under ethical and legal scrutiny. Both trends have the common goal of responsibly addressing investors ‘concerns about the financial reporting system. However there has been laxity in implementation of internal audit findings and recommendations. This research will specifically look at internal audit mechanism on financial performance of beverage firms. This study will have a look at the internal audit function in private firms, the role they play in the organisation, internal audit and asset management and how the effect on financial performance.